Foreign Relations of the United States, 1949, Council of Foreign Ministers; Germany and Austria, Volume III

740.00119 EW/3–1149: Telegram

The Secretary of State to the Embassy in the United Kingdom

secret
us urgent

Washington, March 11, 1949—7 p.m.

823. For the Ambassador.

Part I

Re our phone conversation Thursday¹ in which you indicated chances favorable of progress concerning Humphrey Report provided you could also discuss prohibited and restricted industries (PRI). Approve this with understanding that it be made clear to Brit and Fr that such negotiations shld not extend longer than 4 or 5 days. Urinfo only, this is because Steering Group of NSC Subcommittee on Germany has recommended early Three-Power conversations to consolidate their [the?] unresolved questions with Brit and Fr affecting-Germany and if this recommendation is approved, best time for such negotiations might be immediately preceding FonMins Conference here on Atlantic Pact or in margin of such conference.

On Humphrey List you have been authorized make several concessions to obtain agreement and to submit to us for our consideration Brit or Fr proposals for further concessions. We want you to be fully as clear on our position re PRI negotiations. We feel this is especially important because our position is such that negotiations will not be easy for you.

Our PRI position arises out of our desire to go cautiously in committing ourselves to long term restrictions on Ger economy. We feel US must not commit itself to restrictions which prevent economic progress and capital development except where absolutely necessary for security purposes. We are certain if we did so our Congress and people wld not endorse the decision and we wld eventually have to revise or abandon it. We cannot contemplate a repetition of our experience with Congress on reparations. For that reason we felt and still feel that instructions sent to Clay are as far as we can go in this matter. Specifically we cannot agree now to commit ourselves to permanent restrictions of type and range under discussion but must insist on limiting our commitment to period preceding peace treaty or some determined date if treaty continues be delayed. Nor are we prepared make concessions greater than those Clay was authorized make with exception of case of shipbuilding, discussed in detail below. We feel maintaining our PRI position far greater importance than Humphrey List in terms of basic policy toward Germany.

Our initial position was that prohibitions and restrictions shld be confined to relatively narrow list. Brit and Fr, however, put forward extensive lists covering broad segments of Ger industry. In Dec we authorized Clay make what we regarded as significant concessions on removal of synthetic oil facilities in exchange for abandonment of proposals by Brit and Fr to impose restrictions on or limits to present capacity in considerable range of industries. If necessary, he was further authorized to agree to limitations to present capacity in most of these industries.

Our understanding is that Clay offered our concessions on condition Brit and Fr agree to remainder of our position. They did not do so and he withdrew concessions. US positions shown in report of Economic Advisers of Jan 5² Brit gave you last month therefore generally represent maximum US positions and not positions from which we are prepared to bargain. I feel that in undertaking negotiations, you shld know these positions already go beyond what we consider satisfactory, and that we cannot consider further concessions in effort to reach agreement solely in context of discussions this subject. Your task in negotiation would therefore be primarily to seek to reach agreement on proposal which has already failed of acceptance at MilGov level.

Our present positions are those set forth in TIN/P(49) 1 of Jan 11,² copy of which you have. There follow below maximum positions you are authorized agree to. Bearing in mind previous history of negotiations and fact these are absolute maxima, your bargaining leeway will be small and you will wish adjust your tactics accordingly.

Coverage

We deem it essential discussion cover entire PRI. Brit proposal wld leave aside number of industries on which we are in disagreement with both Brit and Fr. Disagreement with both Brit and Fr involves scope of removals, while there are further disagreements with Fr concerning their proposals to limit production or exports in certain industries. Brit proposal wld bring under negotiation only matters they deem of importance and force us to negotiate remainder later after our bargaining power has been completely exhausted.

Duration

Our position has been that the agreement to continue these restrictions should be effective until the conclusion of a Ger peace settlement unless such a settlement is unduly delayed. When there is a settlement, it has been our position that the entire subject shld be reviewed and that we were free to reconsider our position on the prohibitions and limitations. We do not wish be caught in a situation where the restrictions continue indefinitely because there is no instrument which cld be regarded as a peace settlement, which seems to us to be a possibility. There must therefore be some device whereby the restrictions can be reviewed in such a situation without necessity for unanimous agreement to any change.

We believe an acceptable agreement re duration cld be worked out in one of two ways:

a. Agreement might be until conclusion of a peace settlement or an agreed date, say end of 1950 or June 30, 1951.

b. Agreement might run until conclusion of peace treaty subject to right of MilGovs to relax limitations (but not prohibitions). Action by MilGovs wld have to be by majority vote, subject to appeal to Govts, but without indefinite suspension in event of appeal.

Part II

A. In beginning negotiations it is desired you make brief statement. Our position those negotiations based belief that security against Germany can best be maintained by total prohibition of a small number of industries without which it wld be impossible for Germany to fight a modern war, that limitations or restrictions on volume of production in any large number of industries will be difficult to justify on security grounds, difficult to enforce and will tend to undermine the acceptance and enforceability of the system as a whole and that security against Germany in practice depends on continued willingness Allied Peoples to enforce restrictions which they judge are fair, necessary to security, and involve minimum of detailed and troublesome administrative action.

B. On basis this view we urge that Brit and Fr Govts reconsider mass of restrictions now under consideration to determine which can be eliminated. This request stems from views expressed in (A) above and additional conviction that Fr and Brit Govts will find, as time passes, that many restrictions they have urged are neither fundamental security measures nor compatible with European cooperative economic development in broadest sense.

C. Steel. You are authorized agree 10.7 million ton limitation (bi-zone production) for steel. Authorized agree that electric furnace steel will be limited to production possible with capacity recommended to be retained by Humphrey report.³

[Here follow specific instructions on various industries and products.]

Part III

Any agreement you, Bevin and Schuman reach on this subject shld be in form of a directive to MilGovs calling upon them to complete their negotiations and submit them to Govts for approval.

Position on shipbuilding stated above not cleared within Govt and shld not be put forward or discussed until you are advised further.

Our agreement to discuss two subjects jointly is on basis stated para 8 ur 773,⁴ i.e., that if no agreement reached within 4 or 5 days, we will be compelled deal with subjects separately again.

Acheson

1. No record of this conversation has been found in Department of State files, but presumably it is the one which Clay and Voorhees discussed in their teletype conference on March 17, p. 105.
2. Not found in Department of State files.
2. Not found in Department of State files.
3. The Humphrey Committee recommended the retention of 472,080 metric tons of electric furnace steel.
4. Ante, p. 557.